,,ib ,union ,calendar ,no4 #bfc #aahth ,,congress #ast ,session ,h4 ,r4 #dgfg ,report ,no4 #aah-cbd ,,in ,,the ,,house ,,of ,,representatives ,july #bj1 #bjbc,mr4 ,steil introduced the following bill2 which was referred to the ,committee on ,financial ,services ,december #ai1 #bjbc,reported with an amendment1 committed to the ,committee of the ,whole ,house on the ,state of the ,union1 and ordered to be printed,strike out all after the enacting clause and insert the part printed in italic,for text of introduced bill1 see copy of bill as introduced on ,july #bj1 #bjbc ,a ,,bill ,to make revisions to the ,federal securities laws with respect to shareholder proposals1 proxy voting1 and the registration of proxy advisory firms1 and for other purposes4 #a4 ,short title2 ,table of contents 7a7 ,short title ,this ,act may be cited as the ,protecting ,americans' ,retirement ,savings from ,politics ,act4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 ,table of contents4,title ,i--,performance over ,politics,sec4 #aja4 ,exclusion of certain substantially similar shareholder proposals4,title ,,ii--,no ,expensive1 ,stifling ,governance,sec4 #bja4 ,exclusion of certain shareholder proposals4,title ,,iii--,exclusion of certain ,,esg shareholder proposals,sec4 #cja4 ,exclusion of certain ,,esg shareholder proposals4,title ,,iv--,exclusions available regardless of significant social policy issue,sec4 #dja4 ,exclusions available regardless of significant social policy issue4,title ,v--,corporate ,governance ,examination,sec4 #eja4 ,study of certain issues with respect to shareholder proposals1 proxy advisory firms1 and the proxy process4,title ,,vi--,registration of proxy advisory firms,sec4 #fja4 ,registration of proxy advisory firms4,title ,,vii--,liability for certain failures to disclose material information or making of material misstatements,sec4 #gja4 ,liability for certain failures to disclose material information or making of material misstatements4,title ,,viii--,duties of investment advisors1 asset managers1 and pension funds,sec4 #hja4 ,duties of investment advisors1 asset managers1 and pension funds4,title ,,ix--,protecting ,americans' ,savings,sec4 #ija4 ,requirements related to proxy voting4,title ,x--,empowering ,shareholders,sec4 #ajja4 ,proxy voting of passively managed funds4,title ,,xi--,protecting ,retail ,investors' ,savings,sec4 #aaja4 ,best interest based on pecuniary factors4,sec4 #aajb4 ,study on climate change and other environmental disclosures in municipal bond market4,sec4 #aajc4 ,study on solicitation of municipal securities business4 ,i ,performance over ,politics #aja4 ,exclusion of certain substantially similar shareholder proposals ,the ,securities and ,exchange ,commission shall revise the resubmission requirements in section #bdj4ad;a-#h7;i77#ab7 of title #ag1 ,code of ,federal ,regulations1 to provide that a shareholder proposal may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the shareholder proposal addresses substantially the same subject matter as a proposal1 or proposals1 previously included in the proxy or consent solicitation material for a meeting of the shareholders of such issuer-- 7#a7 for a meeting of the shareholders conducted in the preceding #e calendar years2 and 7#b7 if the most recent vote-- 7,a7 occurred in the preceding #c calendar years2 and 7,b7 7i7 if voted on once during such #e-year period1 received less than #aj percent of the votes cast2 7ii7 if voted on twice during such #e-year period1 received less than #bj percent of the votes cast2 or 7iii7 if voted on three or more times during such #e-year period1 received less than #dj percent of the votes cast4 ,,ii ,no ,expensive1 ,stifling ,governance #bja4 ,exclusion of certain shareholder proposals 7a7 ,exclusion of certain shareholder proposals ,a shareholder proposal submitted to an issuer pursuant to section #bdj4ad;a-#h of title #ag1 ,code of ,federal ,regulations1 may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the shareholder proposal-- 7#a7 has been substantially implemented by the issuer by implementing policies1 practices1 or procedures that compare favorably with the guidelines of the proposal and address the proposal's underlying concerns2 or 7#b7 substantially duplicates by having the same principal thrust or principal focus as another proposal previously submitted to the issuer by another proponent that will be included in such material4 7b7 ,nullification of proposed rule ,the ,securities and ,exchange ,commission may not finalize or apply the positions contained in the proposed rule entitled ,substantial ,implementation1 ,duplication1 and ,resubmission of ,shareholder ,proposals under ,exchange ,act ,rule #ad;a-#h 7#hg ,fed4 ,reg4 #dejeb71 issue any substantially similar rule1 or apply any substantially similar rule1 including with respect to a no-action or other interpretive request4 ,,iii ,exclusion of certain ,,esg shareholder proposals #cja4 ,exclusion of certain ,,esg shareholder proposals ,a shareholder proposal submitted to an issuer pursuant to section #bdj4ad;a-#h of title #ag1 ,code of ,federal ,regulations1 may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the subject matter of the shareholder proposal is environmental1 social1 or political 7or a similar subject matter74 ,,iv ,exclusions available regardless of significant social policy issue #dja4 ,exclusions available regardless of significant social policy issue ,an issuer may exclude a shareholder proposal pursuant to section #bdj4ad;a-#h7;i7 of title #ag1 ,code of ,federal ,regulations1 without regard to whether such shareholder proposal relates to a significant social policy issue4 ,v ,corporate ,governance ,examination #eja4 ,study of certain issues with respect to shareholder proposals1 proxy advisory firms1 and the proxy process ,section #d7;j7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;d7j77 is amended by adding at the end the following3 7#aj7 ,study of certain issues with respect to shareholder proposals1 proxy advisory firms1 and the proxy process 7,a7 ,in general ,not later than #ahj days after the date of the enactment of this paragraph1 and every #e years thereafter1 the ,commission shall conduct a comprehensive study on shareholder proposals1 proxy advisory firms1 and the proxy process4 7,b7 ,scope of study ,the studies required under subparagraph 7,a7 shall cover-- 7i7 the previous #aj years1 with respect to the initial study2 and 7ii7 the previous #e years1 with respect to each other study4 7,c7 ,contents ,each study required under subparagraph 7,a7 shall address the following issues3 7i7 ,the financial and other incentives and obligations of all groups involved in the proxy process4 7ii7 ,a consideration of whether financial and other incentives have created a process that no longer serves the economic interests of long-term retail investors4 7iii7 ,an analysis of whether regulations and financial incentives have created and protected the outsized influence of proxy advisors or a duopoly in proxy advice1 and if so1 what are the benefits and costs of that outsized influence or duopoly4 7iv7 ,the costs incurred by issuers in responding to politically-1 environmentally-1 or socially-motivated shareholder proposals4 7v7 ,an assessment1 including a cost-benefit analysis1 of the adequacy of the current submission thresholds in ,rule #ad;a-#h 7#ag ,,cfr #bdj4ad;a-#h7 to ensure that shareholder proponents have demonstrated a meaningful economic stake in a company1 which is appropriate to effectively serve markets and shareholders at large4 7vi7 ,an examination of the extent to which the politicization of the shareholder proposal process is increasing the operating costs of public companies4 7vii7 ,an analysis of the impact that shareholder proposals have on discouraging private companies from going public4 7viii7 ,an evaluation of the risk that shareholder proposals may contribute to the balkanization of the ,u4,s4 economy over time4 7ix7 ,a thorough assessment of the economic analysis1 if any1 conducted by proxy advisory firms and institutional shareholders when recommending or voting in favor of shareholder proposals4 7x7 ,a review of the extent to which institutional investors1 who owe fiduciary duties1 rely on proxy advisory firm recommendations4 7xi7 ,an assessment of whether1 in light of their significant influence on corporate actions and vote outcomes1 proxy advisors are subject to sufficient and effective regulation to ensure that their policies and recommendations are accurate1 free of conflicts1 and benefit the economic best interest of shareholders at large4 7,d7 ,report ,at the completion of each study required under subparagraph 7,a7 the ,commission shall issue a report to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives that includes the results of the study4 4 ,,vi ,registration of proxy advisory firms #fja4 ,registration of proxy advisory firms 7a7 ,amendment ,the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq47 is amended by inserting after section #ae;,g the following new section3 #ae;,h4 ,registration of proxy advisory firms 7a7 ,conduct prohibited ,it shall be unlawful for a proxy advisory firm to make use of the mails or any means or instrumentality of interstate commerce to provide proxy voting advice1 research1 analysis1 ratings or recommendations to any client1 unless such proxy advisory firm is registered under this section4 7b7 ,registration procedures 7#a7 ,application for registration 7,a7 ,in general ,a proxy advisory firm shall file with the ,commission an application for registration1 in such form as the ,commission shall require1 by rule1 and containing the information described in subparagraph 7,b74 7,b7 ,required information ,an application for registration under this section shall contain-- 7i7 a certification that the applicant is able to consistently provide proxy advice based on accurate information2 7ii7 with respect to clients of the applicant that vote shares held on behalf of shareholders1 a certification that the applicant-- 7,i7 will provide proxy voting advice only in the best economic interest of those shareholders2 and 7,,ii7 has the requisite expertise to ensure that voting recommendations are in the best economic interest of those shareholders2 7iii7 information on the procedures and methodologies that the applicant uses to ensure that proxy voting recommendations are in the best economic interest of the ultimate shareholders2 7iv7 information on the organizational structure of the applicant2 7v7 an explanation of whether or not the applicant has in effect a code of ethics1 and if not1 the reasons therefor2 7vi7 a description of any potential or actual conflict of interest relating to the provision of proxy advisory services1 including those arising out of or resulting from the ownership structure of the applicant or the provision of other services by the applicant or any person associated with the applicant2 7vii7 the policies and procedures in place to publicly disclose and manage conflicts of interest under subsection 7f72 7viii7 information related to the professional and academic qualifications of staff tasked with providing proxy advisory services2 and 7ix7 any other information and documents concerning the applicant and any person associated with such applicant as the ,commission1 by rule1 may prescribe as necessary or appropriate in the public interest or for the protection of investors4 7#b7 ,review of application 7,a7 ,initial determination ,not later than #ij days after the date on which the application for registration is filed with the ,commission under paragraph 7#a7 7or within such longer period as to which the applicant consents7 the ,commission shall-- 7i7 by order1 grant registration2 or 7ii7 institute proceedings to determine whether registration should be denied4 7,b7 ,conduct of proceedings 7i7 ,content ,proceedings referred to in subparagraph 7,a77ii7 shall-- 7,i7 include notice of the grounds for denial under consideration and an opportunity for hearing2 and 7,,ii7 be concluded not later than #abj days after the date on which the application for registration is filed with the ,commission under paragraph 7#a74 7ii7 ,determination ,at the conclusion of such proceedings1 the ,commission1 by order1 shall grant or deny such application for registration4 7iii7 ,extension authorized ,the ,commission may extend the time for conclusion of such proceedings for not longer than #ij days1 if the ,commission finds good cause for such extension and publishes its reasons for so finding1 or for such longer period as to which the applicant consents4 7,c7 ,grounds for decision ,the ,commission shall grant registration under this subsection-- 7i7 if the ,commission finds that the requirements of this section are satisfied2 and 7ii7 unless the ,commission finds 7in which case the ,commission shall deny such registration7 that-- 7,i7 the applicant has failed to certify to the ,commission's satisfaction that it is able to consistently provide proxy advice based on accurate information and to materially comply with the procedures and methodologies disclosed under paragraph 7#a77;,b7 and with subsections 7f7 and 7g72 or 7,,ii7 if the applicant were so registered1 its registration would be subject to suspension or revocation under subsection 7d74 7#c7 ,public availability of information ,subject to section #bd1 the ,commission shall make the information and documents submitted to the ,commission by a proxy advisory firm in its completed application for registration1 or in any amendment submitted under paragraph 7#a7 or 7#b7 of subsection 7c71 publicly available on the ,commission's website1 or through another comparable1 readily accessible means4 7c7 ,update of registration 7#a7 ,update ,each registered proxy advisory firm shall promptly amend and update its application for registration under this section if any information or document provided therein becomes materially inaccurate1 except that a registered proxy advisory firm is not required to amend the information required to be filed under subsection 7b77#a77;,b77i7 by filing information under this paragraph1 but shall amend such information in the annual submission of the organization under paragraph 7#b7 of this subsection4 7#b7 ,certification ,not later than #ij calendar days after the end of each calendar year1 each registered proxy advisory firm shall file with the ,commission an amendment to its registration1 in such form as the ,commission1 by rule1 may prescribe as necessary or appropriate in the public interest or for the protection of investors-- 7,a7 certifying that the information and documents in the application for registration of such registered proxy advisory firm continue to be accurate in all material respects2 and 7,b7 listing any material change that occurred to such information or documents during the previous calendar year4 7d7 ,censure1 denial1 or suspension of registration2 notice and hearing ,the ,commission1 by order1 shall censure1 place limitations on the activities1 functions1 or operations of1 suspend for a period not exceeding #ab months1 or revoke the registration of any registered proxy advisory firm if the ,commission finds1 on the record after notice and opportunity for hearing1 that such censure1 placing of limitations1 suspension1 or revocation is necessary for the protection of investors and in the public interest and that such registered proxy advisory firm1 or any person associated with such an organization1 whether prior to or subsequent to becoming so associated-- 7#a7 has committed or omitted any act1 or is subject to an order or finding1 enumerated in subparagraph 7,a71 7,d71 7,e71 7,h71 or 7,g7 of section #ae7;b77#d71 has been convicted of any offense specified in section #ae7;b77#d77;,b71 or is enjoined from any action1 conduct1 or practice specified in subparagraph 7,c7 of section #ae7;b77#d71 during the #aj-year period preceding the date of commencement of the proceedings under this subsection1 or at any time thereafter2 7#b7 has been convicted during the #aj-year period preceding the date on which an application for registration is filed with the ,commission under this section1 or at any time thereafter1 of-- 7,a7 any crime that is punishable by imprisonment for #a or more years1 and that is not described in section #ae7;b77#d77;,b72 or 7,b7 a substantially equivalent crime by a foreign court of competent jurisdiction2 7#c7 is subject to any order of the ,commission barring or suspending the right of the person to be associated with a registered proxy advisory firm2 7#d7 fails to furnish the certifications required under subsections 7b77#b77;,c77ii77,i7 and 7c77#b72 7#e7 has engaged in one or more prohibited acts enumerated in paragraph 7#a72 7#f7 fails to maintain adequate financial and managerial resources to consistently offer advisory services to clients that vote shares held on behalf of shareholders consistent with the best economic interest of those shareholders1 including by failing to comply with subsections 7f7 or 7g72 7#g7 fails to maintain adequate expertise to ensure that proxy advisory services for clients that vote shares held on behalf of shareholders are tied to the best economic interest of those shareholders2 or 7#h7 engages in a prohibited act enumerated in subsection 7j74 7e7 ,termination of registration 7#a7 ,voluntary withdrawal ,a registered proxy advisory firm may1 upon such terms and conditions as the ,commission may establish as necessary in the public interest or for the protection of investors1 which terms and conditions shall include at a minimum that the registered proxy advisory firm will no longer conduct such activities as to bring it within the definition of proxy advisory firm in section #c7;a77#hb71 withdraw from registration by filing a written notice of withdrawal to the ,commission4 7#b7 ,commission authority ,in addition to any other authority of the ,commission under this title1 if the ,commission finds that a registered proxy advisory firm is no longer in existence or has ceased to do business as a proxy advisory firm1 the ,commission1 by order1 shall cancel the registration under this section of such registered proxy advisory firm4 7f7 ,management of conflicts of interest 7#a7 ,organization policies and procedures ,each registered proxy advisory firm shall establish1 maintain1 and enforce written policies and procedures reasonably designed1 taking into consideration the nature of the business of such registered proxy advisory firm and associated persons1 to publicly disclose and manage any conflicts of interest that arise or would reasonably be expected to arise from such business4 7#b7 ,commission authority ,the ,commission shall1 within one year of the date of enactment of this section1 issue final rules to prohibit1 or require the management and public disclosure of1 any conflicts of interest relating to the offering of proxy advisory services by a registered proxy advisory firm1 including1 without limitation1 conflicts of interest relating to-- 7,a7 the manner in which a registered proxy advisory firm is compensated by the client1 any affiliate of the client1 or any other person for providing proxy advisory services2 7,b7 business relationships1 ownership interests1 or any other financial or personal interests between a registered proxy advisory firm1 or any person associated with such registered proxy advisory firm1 and any client1 or any affiliate of such client2 7,c7 the formulation of proxy voting policies2 7,d7 the execution1 or assistance with the execution1 of proxy votes if such votes are based upon recommendations made by the proxy advisory firm in which a person other than the issuer is a proponent2 and 7,e7 any other potential conflict of interest1 as the ,commission deems necessary or appropriate in the public interest or for the protection of investors4 7#c7 ,disclosure on factors influencing recommendations ,each registered proxy advisory firm shall annually disclose to the ,commission and make publicly available the economic and other factors that a reasonable investor would expect to influence the recommendations of such proxy advisory firm1 including the ownership composition of such proxy advisory firm and any meetings with1 or feedback received from1 outside entities4 7g7 ,reliability of proxy advisory firm services 7#a7 ,in general ,each registered proxy advisory firm shall-- 7,a7 have staff and other resources sufficient to produce proxy voting recommendations that are based on accurate and current information and designed for clients that vote shares held on behalf of shareholders to advance the best economic interest of those shareholders2 7,b7 implement procedures that permit issuers that are the subject of proxy voting recommendations-- 7i7 access in a reasonable time to data and information used to make recommendations2 and 7ii7 a reasonable opportunity to provide meaningful comment and corrections to such data and information1 including the opportunity to present 7in person or telephonically7 details to the person responsible for developing such data and information prior to the publication of proxy voting recommendations to clients2 7,c7 employ an ombudsman to receive complaints about the accuracy of information used in making recommendations from the companies that are the subject of the proxy advisory firm's voting recommendations and seek to resolve those complaints in a timely fashion and prior to the publication of proxy voting recommendations to clients2 and 7,d7 if the ombudsman is unable to resolve a complaint to a company's satisfaction prior to the publication of proxy voting recommendations to clients1 include in the final report of the firm to clients-- 7i7 a statement detailing the company's complaints1 if requested in writing by the company2 and 7ii7 a statement explaining why the proxy voting recommendation is in the best economic interest of shareholders4 7#b7 ,definitions ,in this subsection3 7,a7 ,data and information used to make recommendations ,the term data and information used to make voting recommendations-- 7i7 means the financial1 operational1 or descriptive data and information on an issuer used by proxy advisory firms and any contextual or substantive analysis impacting the recommendation2 and 7ii7 does not include the entirety of the proxy advisory firm's final report to its clients4 7,b7 ,reasonable time ,the term reasonable time-- 7i7 means not less than #a week before the publication of proxy voting recommendations for clients2 and 7ii7 shall not otherwise interfere with a proxy advisory firm's ability to provide its clients with timely access to accurate proxy voting research1 analysis1 or recommendations4 7h7 ,private right of action with respect to illegal recommendations ,any proxy advisory firm that endorses a proposal that is not supported by the issuer but is approved and subsequently found by a court of competent jurisdiction to violate ,state or ,federal law shall be liable to the applicable issuer for the costs associated with the approval of such proposal1 including implementation costs and any penalties incurred by the issuer4 7i7 ,designation of compliance officer ,each registered proxy advisory firm shall designate an individual who reports directly to senior management as responsible for administering the policies and procedures that are required to be established pursuant to subsections 7f7 and 7g71 and for ensuring compliance with the securities laws and the rules and regulations thereunder1 including those promulgated by the ,commission pursuant to this section4 7j7 ,prohibited conduct 7#a7 ,prohibited acts and practices ,not later than one year after the date of enactment of this section1 the ,commission shall issue final rules to prohibit any act or practice relating to the offering of proxy advisory services by a registered proxy advisory firm that the ,commission determines to be unfair1 coercive1 or abusive1 including any act or practice relating to-- 7,a7 advisory or consulting services 7offered directly or indirectly1 including through an affiliate7 related to corporate governance issues2 or 7,b7 modifying a voting recommendation or otherwise departing from its adopted systematic procedures and methodologies in the provision of proxy advisory services1 based on whether an issuer1 or affiliate thereof1 subscribes or will subscribe to other services or product of the registered proxy advisory firm or any person associated with such organization4 7#b7 ,rule of construction ,nothing in paragraph 7#a71 or in any rules or regulations adopted thereunder1 may be construed to modify1 impair1 or supersede the operation of any of the antitrust laws 7as defined in the first section of the ,clayton ,act1 except that such term includes section #e of the ,federal ,trade ,commission ,act1 to the extent that such section #e applies to unfair methods of competition74 7k7 ,statements of financial condition ,each registered proxy advisory firm shall1 on a confidential basis1 file with the ,commission1 at intervals determined by the ,commission1 such financial statements1 certified 7if required by the rules or regulations of the ,commission7 by an independent public auditor1 and information concerning its financial condition1 as the ,commission1 by rule1 may prescribe as necessary or appropriate in the public interest or for the protection of investors4 7l7 ,annual report 7#a7 ,in general ,each registered proxy advisory firm shall1 not later than #ij calendar days after the end of each fiscal year1 file with the ,commission and make publicly available an annual report in such form as the ,commission1 by rule1 may prescribe as necessary or appropriate in the public interest or for the protection of investors4 7#b7 ,contents ,each annual report required under paragraph 7#a7 shall include1 at a minimum1 disclosure by the registered proxy advisory firm of the following3 7,a7 ,a list of shareholder proposals the staff of the registered proxy advisory firm reviewed in the prior fiscal year4 7,b7 ,a list of the recommendations made in the prior fiscal year4 7,c7 ,the economic analysis conducted to determine that final recommendations provided in the prior fiscal year 7other than recommendations relating to an issuer-sponsored proposal or recommendations consistent with that of a board of directors composed of a majority of independent directors7 delivered to clients that vote shares held on behalf of shareholders were in the best economic interest of those shareholders4 7,d7 ,the staff who reviewed and made recommendations on such proposals in the prior fiscal year4 7,e7 ,the qualifications of such staff to ensure that each of the recommendations for clients that vote shares held on behalf of shareholders were tied to the best economic interest of those shareholders4 7,f7 ,the recommendations made in the prior fiscal year where the proponent of such recommendation was a client of or received services from the proxy advisory firm4 7,g7 ,a certification by the chief executive officer1 chief financial officer1 and the primary executive responsible for overseeing the compilation and dissemination of proxy voting advice that the final recommendations 7other than recommendations relating to an issuer-sponsored proposal or recommendations consistent with that of a board of directors composed of a majority of independent directors7 delivered to clients that vote shares held on behalf of shareholders in the last fiscal year-- 7i7 were based on internal controls and procedures that are designed to ensure accurate information and that such internal controls and procedures are effective2 7ii7 do not violate applicable ,state or ,federal law2 and 7iii7 were based on the best economic interest of those shareholders4 7,h7 ,the economic and other factors that a reasonable investor would expect to influence the recommendations of such proxy advisory firm1 including the ownership composition of such proxy advisory firm4 7m7 ,transparent policies ,each registered proxy advisory firm shall file with the ,commission and make publicly available its methodology for the formulation of proxy voting policies and voting recommendations to clients that vote shares held on behalf of shareholders and how that methodology ensures that the firm's voting recommendations are in the best economic interest of those shareholders4 7n7 ,rules of construction ,registration under and compliance with this section does not constitute a waiver of1 or otherwise diminish1 any right1 privilege1 or defense that a registered proxy advisory firm may otherwise have under any provision of ,state or ,federal law1 including any rule1 regulation1 or order thereunder4 7o7 ,regulations 7#a7 ,new provisions ,such rules and regulations as are required by this section or are otherwise necessary to carry out this section1 including the application form required under subsection 7a7-- 7,a7 shall be issued by the ,commission1 not later than #ahj days after the date of enactment of this section2 and 7,b7 shall become effective not later than #a year after the date of enactment of this section4 7#b7 ,review of existing regulations ,not later than #bgj days after the date of enactment of this section1 the ,commission shall-- 7,a7 review its existing rules and regulations which affect the operations of proxy advisory firms2 and 7,b7 amend or revise such rules and regulations in accordance with the purposes of this section1 and issue such guidance as the ,commission may prescribe as necessary or appropriate in the public interest or for the protection of investors4 7p7 ,applicability ,this section1 other than subsection 7n71 which shall apply on the date of enactment of this section1 shall apply on the earlier of-- 7#a7 the date on which regulations are issued in final form under subsection 7o77#a72 or 7#b7 #bgj days after the date of enactment of this section4 7q7 ,best economic interest defined ,in this section1 the term best economic interest means decisions that seek to maximize investment returns over a time horizon consistent with the investment objectives and risk management profile of the fund in which the shareholders are invested4 4 7b7 ,conforming amendment ,section #ag7;a77#a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghq7a77#a77 is amended by inserting proxy advisory firm1 after nationally recognized statistical rating organization14 7c7 ,proxy advisory firm definitions ,section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77 is amended-- 7#a7 by redesignating the second paragraph 7#hj7 7relating to funding portal7 as paragraph 7#ha72 and 7#b7 by adding at the end the following3 7#hb7 ,proxy advisory firm ,the term proxy advisory firm-- 7,a7 means any person who is primarily engaged in the business of providing proxy voting advice1 research1 analysis1 ratings1 or recommendations to clients1 which conduct constitutes a solicitation within the meaning of section #ad2 and 7,b7 does not include any person that is exempt under law or regulation from the requirements otherwise applicable to persons engaged in such a solicitation4 7#hc7 ,person associated with a proxy advisory firm ,with respect to a proxy advisory firm-- 7,a7 a person is associated with the proxy advisory firm if the person is-- 7i7 a partner1 officer1 or director of the proxy advisory firm 7or any person occupying a similar status or performing similar functions72 7ii7 a person directly or indirectly controlling1 controlled by1 or under common control with the proxy advisory firm2 7iii7 an employee of the proxy advisory firm2 or 7iv7 a person the ,commission determines by rule is controlled by the proxy advisory firm2 and 7,b7 a person is not associated with the proxy advisory firm if the person only performs clerical or ministerial functions with respect to a proxy advisory firm4 4 ,,vii ,liability for certain failures to disclose material information or making of material misstatements #gja4 ,liability for certain failures to disclose material information or making of material misstatements ,section #ad of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghn7 is amended by adding at the end the following3 7l7 ,false or misleading statements ,for purposes of section #ah1 the failure to disclose material information 7such as a proxy voting advice business's methodology1 sources of information1 or conflicts of interest7 or the making of a material misstatement regarding proxy voting advice that makes a recommendation to a security holder as to the security holder's vote1 consent1 or authorization on a specific matter for which security holder approval is solicited1 and that is furnished by a person that markets the person's expertise as a provider of such proxy voting advice separately from other forms of investment advice1 and sells such proxy voting advice for a fee1 shall be considered to be false or misleading with respect to a material fact4 4 ,,viii ,duties of investment advisors1 asset managers1 and pension funds #hja4 ,duties of investment advisors1 asset managers1 and pension funds ,section #ac7;f7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghm7f77 is amended by adding at the end the following3 7#g7 ,disclosures by institutional investment managers in connection with proxy advisory firms 7,a7 ,in general ,every institutional investment manager which uses the mails1 or any means or instrumentality of interstate commerce in the course of its business as an institutional investment manager1 which engages a proxy advisory firm1 and which exercises voting power with respect to accounts holding equity securities of a class described in subsection 7d77#a7 or otherwise becomes or is deemed to become a beneficial owner of any security of a class described in subsection 7d77#a7 upon the purchase or sale of a security-based swap that the ,commission may define by rule1 shall file an annual report with the ,commission containing-- 7i7 an explanation of how the institutional investment manager voted with respect to each shareholder proposal2 7ii7 the percentage of votes cast on shareholder proposals that were consistent with proxy advisory firm recommendations1 for each proxy advisory firm retained by the institutional investment manager2 7iii7 an explanation of-- 7,i7 how the institutional investment manager took into consideration proxy advisory firm recommendations in making voting decisions1 including the degree to which the institutional investment manager used those recommendations in making voting decisions2 7,,ii7 how often the institutional investment manager voted consistent with a recommendation made by a proxy advisory firm1 expressed as a percentage2 7,,iii7 how such votes are reconciled with the fiduciary duty of the institutional investment manager to vote in the best economic interests of shareholders2 7,,iv7 how frequently votes were changed when an error occurred or due to new information from issuers2 and 7,v7 the degree to which investment professionals of the institutional investment manager were involved in proxy voting decisions2 and 7iv7 a certification that the voting decisions of the institutional investment manager were based solely on the best economic interest of the shareholders on behalf of whom the institutional investment manager holds shares4 7,b7 ,requirements for larger institutional investment managers ,every institutional investment manager described in subparagraph 7,a7 that has assets under management with an aggregate fair market value on the last trading day in any of the preceding twelve months of at least #ajj1jjj1jjj1jjj shall-- 7i7 in any materials provided to customers and related to customers voting their shares1 clarify that shareholders are not required to vote on every proposal2 7ii7 with respect to each shareholder proposal for which the institutional investment manager votes 7other than votes consistent with the recommendation of a board of directors composed of a majority of independent directors7 perform an economic analysis before making such vote1 to determine that the vote is in the best economic interest of the shareholders on behalf of whom the institutional investment manager holds shares2 and 7iii7 include each economic analysis required under clause 7ii7 in the annual report required under subparagraph 7,a74 7,c7 ,best economic interest defined ,in this paragraph1 the term best economic interest means decisions that seek to maximize investment returns over a time horizon consistent with the investment objectives and risk management profile of the fund in which shareholders are invested4 4 ,,ix ,protecting ,americans' ,savings #ija4 ,requirements related to proxy voting ,section #ad of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghn71 as amended by section #gja1 is further amended by adding at the end the following3 7m7 ,prohibition on robovoting 7#a7 ,in general ,the ,commission shall issue final rules prohibiting the use of robovoting with respect to votes related to proxy or consent solicitation materials4 7#b7 ,robovoting defined ,in this subsection1 the term robovoting means the practice of automatically voting in a manner consistent with the recommendations of a proxy advisory firm or pre-populating votes on a proxy advisory firm's electronic voting platform with the proxy advisory firm's recommendations1 in either case1 without independent review and analysis4 7n7 ,prohibition on outsourcing voting decisions by institutional investors ,with respect to votes related to proxy or consent solicitation materials1 an institutional investor may not outsource voting decisions to any person other than an investment adviser or a broker or dealer that is registered with the ,commission and has a fiduciary or best interest duty to the institutional investor4 7o7 ,no requirement to vote ,no person may be required to cast votes related to proxy or consent solicitation materials4 7p7 ,proxy advisory firm calculation of votes ,with respect to votes related to proxy or consent solicitation materials with respect to an issuer1 a proxy advisor firm shall calculate the vote result consistent with the law of the ,state in which the issuer is incorporated4 4 ,x ,empowering ,shareholders #ajja4 ,proxy voting of passively managed funds 7a7 ,in general ,the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#a et seq47 is amended by inserting after section #bjh 7#ae ,u4,s4,c4 #hj;b-#h7 the following3 #bjh;,a4 ,proxy voting of passively managed funds 7a7 ,investment adviser proxy voting 7#a7 ,in general ,an investment adviser that holds authority to vote a proxy solicited by an issuer pursuant to section #ad of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghn7 in connection with any vote of covered securities held by a passively managed fund shall-- 7,a7 vote in accordance with the instructions of the beneficial owner of a voting security of the passively managed fund2 7,b7 vote in accordance with the voting recommendations of such issuer2 or 7,c7 abstain from voting but make reasonable efforts to be considered present for purposes of establishing a quorum4 7#b7 ,exception ,paragraph 7#a7 shall not apply with respect to a vote on a routine matter4 7b7 ,safe harbor ,with respect to a matter that is not a routine matter1 in the case of a vote described in subsection 7a77#a71 an investment adviser shall not be liable to any person under any law or regulation of the ,united ,states1 any constitution1 law1 or regulation of any ,state or political subdivision thereof1 or under any contract or other legally enforceable agreement 7including any arbitration agreement71 for any of the following3 7#a7 ,voting in accordance with the instructions of the beneficial owner of a voting security of the passively managed fund4 7#b7 ,not soliciting voting instructing from any person under subsection 7a77#a7 with respect to such vote4 7#c7 ,voting in accordance with the voting recommendations of an issuer pursuant to subparagraph 7,b7 of such subsection4 7#d7 ,abstaining from voting in accordance with subparagraph 7,c7 of such subsection4 7c7 ,foreign private issuers exemption ,subsection 7a7 shall not apply with respect to a foreign private issuer if the voting policy of the investment advisor with respect to such foreign private issuers is fully and fairly disclosed to beneficial owners1 including the extent to which such policy differs from the voting policy for non-exempt issuers4 7d7 ,definitions ,in this section3 7#a7 ,covered security ,the term covered security-- 7,a7 means a voting security1 as that term is defined in section #b7;a7 of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#b7;a771 in which a qualified fund is invested2 and 7,b7 does not include any voting security 7as defined in subparagraph 7,a77 of an issuer registered with the ,commission as an investment company under section #h of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#h74 7#b7 ,passively managed fund ,the term passively managed fund means a qualified fund that-- 7,a7 is designed to track1 or is derived from1 an index of securities or a portion of such an index2 7,b7 discloses that the qualified fund is a passive index fund2 or 7,c7 allocates not less than #fj percent of the total assets of the qualified fund to an investment strategy that is designed to track1 or is derived from1 an index of securities or a portion of such an index fund4 7#c7 ,qualified fund ,the term qualified fund means-- 7,a7 an investment company1 as that term is defined in section #c of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#c72 7,b7 a private fund2 7,c7 an eligible deferred compensation plan1 as that term is defined in section #deg7;b7 of the ,internal ,revenue ,code of #aihf2 7,d7 a trust1 plan1 account1 or other entity described in section #c7;c77#aa7 of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#c7;c77#aa772 7,e7 a plan maintained by an employer described in clause 7i71 7ii71 or 7iii7 of section #djc7;b77#a77;,a7 of the ,internal ,revenue ,code of #aihf to provide annuity contracts described in section #djc7;b7 of such ,code2 7,f7 a common trust fund1 or similar fund1 maintained by a bank2 7,g7 any fund established under section #hdch7;b77#a7 of title #e1 ,united ,states ,code2 or 7,h7 any separate managed account of a client of an investment adviser4 7#d7 ,registrant ,the term registrant means an issuer of covered securities4 7#e7 ,routine matter ,the term routine matter-- 7,a7 includes a proposal that relates to-- 7i7 an election with respect to the board of directors of the registrant2 7ii7 the compensation of management or the board of directors of the registrant2 7iii7 the selection of auditors2 7iv7 a matter where there is a material conflict of interest between or among the issuer1 members of management1 members of the board of directors1 or an affiliate of the issuer2 7v7 declassification2 or 7vi7 transactions that would transform the structure of the registrant1 including-- 7,i7 a merger or consolidation2 and 7,,ii7 the sale1 lease1 or exchange of all1 or substantially all1 of the property and assets of a registrant2 and 7,b7 does not include-- 7i7 a proposal that is not submitted to a holder of covered securities by means of a proxy statement comparable to that described in section #bdj4ad;a-#aja of title #ag1 ,code of ,federal ,regulations1 or any successor regulation2 or 7ii7 a proposal that is-- 7,i7 the subject of a counter-solicitation2 or 7,,ii7 part of a proposal made by a person other than the applicable registrant4 4 7b7 ,effective date ,the amendment made by this section shall take effect on the first ,august #a that occurs after the date that is #b years after the date of enactment of this ,act4 ,,xi ,protecting ,retail ,investors' ,savings #aaja4 ,best interest based on pecuniary factors 7a7 ,in general ,section #baa7;g7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#aa7;g77 is amended by adding at the end the following3 7#c7 ,best interest based on pecuniary factors 7,a7 ,in general ,for purposes of paragraph 7#a71 the best interest of a customer shall be determined using pecuniary factors1 which may not be subordinated to or limited by non-pecuniary factors1 unless the customer provides informed consent1 in writing1 that such non-pecuniary factors be considered4 7,b7 ,disclosure of pecuniary factors ,if a customer provides a broker1 dealer1 or investment adviser with the informed consent to consider non-pecuniary factors described under subparagraph 7,a71 the broker1 dealer1 or investment adviser shall-- 7i7 disclose the expected pecuniary effects to the customer over a time period selected by the customer and not to exceed three years2 and 7ii7 at the end of the time period described in clause 7i71 disclose1 by comparison to a reasonably comparable index or basket of securities selected by the customer1 the actual pecuniary effects of that time period1 including all fees1 costs1 and other expenses incurred to consider non-pecuniary factors4 7,c7 ,pecuniary factor defined ,in this paragraph1 the term pecuniary factor means a factor that a fiduciary prudently determines is expected to have a material effect on the risk or return of an investment based on appropriate investment horizons4 4 7b7 ,rulemaking ,not later than the end of the #ab-month period beginning on the date of enactment of this ,act1 the ,securities and ,exchange ,commission shall revise or issue such rules as may be necessary to implement the amendment made by subsection 7a74 7c7 ,applicability ,the amendment made by subsection 7a7 shall apply to actions taken by a broker1 dealer1 or investment adviser beginning on the date that is #ab months after the date of enactment of this ,act4 #aajb4 ,study on climate change and other environmental disclosures in municipal bond market 7a7 ,in general ,the ,securities and ,exchange ,commission shall-- 7#a7 conduct a study to determine the extent to which issuers of municipal securities 7as such term is defined in section #c7;a77#bi7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77#bi77 make disclosures to investors regarding climate change and other environmental matters2 and 7#b7 solicit public comment with respect to such study4 7b7 ,contents ,the study required under subsection 7a7 shall consider and analyze-- 7#a7 the frequency with which disclosures described in subsection 7a77#a7 are made2 7#b7 whether such disclosures made by issuers of municipal securities in connection with offerings of securities align with such disclosures made by issuers of municipal securities in other contexts or to audiences other than investors2 7#c7 any voluntary or mandatory disclosure standards observed by issuers of municipal securities in the course of making such disclosures2 7#d7 the degree to which investors consider such disclosures in connection with making an investment decision2 and 7#e7 such other information as the ,securities and ,exchange ,commission determines appropriate4 7c7 ,report ,not later than #a year after the date of the enactment of this ,act1 the ,securities and ,exchange ,commission shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives a report that includes-- 7#a7 the results of the study required under this section2 7#b7 a detailed discussion of the financial risks to investors from investments in municipal securities2 7#c7 whether such risks are adequately disclosed to investors2 and 7#d7 recommended regulatory or legislative steps to address any concerns identified in the study4 #aajc4 ,study on solicitation of municipal securities business 7a7 ,in general ,the ,securities and ,exchange ,commission shall-- 7#a7 conduct a study on the effectiveness of each covered rule in preventing the payment of funds to elected officials or candidates for elected office in exchange for the receipt of government business in connection with the offer or sale of municipal securities2 and 7#b7 solicit public comment with respect to such study4 7b7 ,contents ,the study required under subsection 7a7 shall consider and analyze-- 7#a7 the effectiveness of each covered rule1 including whether each covered rule accomplishes the intended effect of such covered rule and has any unintended adverse effects2 7#b7 the frequency and scope of enforcement actions undertaken pursuant to each covered rule2 7#c7 the degree to which-- 7,a7 persons subject to each covered rule-- 7i7 have in effect policies and procedures intended to ensure compliance with each such covered rule2 and 7ii7 are disadvantaged from participating in the political process generally and in relation to persons who solicit or receive government business or government licenses1 permits1 and approvals other than in connection with the offer or sale of municipal securities2 and 7,b7 other ,state and ,federal laws and regulations impact the solicitation of municipal securities business2 and 7#d7 such other information as the ,securities and ,exchange ,commission determines appropriate4 7c7 ,report ,not later than #a year after the date of the enactment of this ,act1 the ,securities and ,exchange ,commission shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives a report that includes-- 7#a7 the results of the study required under this section2 7#b7 an analysis of the extent to which persons affiliated with small businesses1 as well as persons affiliated with minority and women opened businesses1 have been affected by the covered rules2 and 7#c7 recommended regulatory or legislative steps to address any concerns identified in the study4 7d7 ,definitions ,in this section3 7#a7 ,covered rule ,the term covered rule means-- 7,a7 ,rule ,g-#ch of the ,municipal ,securities ,rulemaking ,board2 and 7,b7 ,rule #bjf7d7-e 7#ag ,,cfr #bge4bjf7d7-e74 7#b7 ,municipal securities ,the term municipal securities has the meaning given the term in section #c7;a77#bi7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a77#bi774 ,december #ai1 #bjbc,reported with an amendment1 committed to the ,committee of the ,whole ,house on the ,state of the ,union1 and ordered to be printed